<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
-------------
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1998 Commission file number 1-12850
XDOGS.COM, INC.
Formerly known as The Sled Dogs Company
(Exact name of small business issuer as specified in its charter)
80 SOUTH EIGHTH STREET, SUITE 3660
MINNEAPOLIS, MINNESOTA 55402
(Address of principal executive offices)
Incorporated under the laws of 84-1168832
the State of Nevada ----------------------------
I.R.S. Identification Number
(612) 359-9020
(Small Business Issuer's telephone number including area code)
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01
PAR VALUE PER SHARE (Title of Class)
Indicate by check mark whether the Company (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes No x
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [x]
<PAGE> 2
The issuer's revenues for its most recent fiscal year were $232,874
The aggregate market value of the Company's common stock held by non-affiliates
of the Company on March 31, 1998 was approximately $675,000 computed by
reference to the average of the closing bid and ask prices as quoted on that
date.
The Company has one class of equity securities outstanding: Common Stock, $.01
par value per share. On March 31, 1998, there were 13,513,193 shares
outstanding. As of June 30, 1998, the date of our reorganization in Bankruptcy
and as part of the reorganization, our common shares were subject to a 54 for 1
reverse split. All references to our shares in this Registration Statement do
not include the effect of the 54 for 1 reverse split of our common stock.
<PAGE> 3
XDOGS.COM, INC.
FORM 10-KSB ANNUAL REPORT FOR THE YEAR ENDED MARCH 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I
ITEM 1. BUSINESS 4
ITEM 2. PROPERTIES 8
ITEM 3. LEGAL PROCEEDINGS 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 8
PART II
ITEM 5. MARKET FOR THE COMPANY'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 8
ITEM 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF 10
OPERATIONS
ITEM 7. FINANCIAL STATEMENTS 11
ITEM 8. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE 41
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT 41
ITEM 10. EXECUTIVE COMPENSATION 43
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT 43
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 44
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 44
</TABLE>
SIGNATURES
----------
<PAGE> 4
References in this document to "us," "we," or "the Company" refer to
Xdogs.com, Inc., its predecessor, and its subsidiary.
PART I
ITEM 1. BUSINESS
GENERAL
We had limited operations as of March 31, 1998. We filed for protection under
Chapter 11 of the U.S. Bankruptcy Code on November 5, 1997. The Plan of
Reorganization was approved on June 30, 1998; and the Order and Final Decree
closing the Chapter 11 case was issued on September 10, 1998. We filed for
protection under the Bankruptcy Code principally because we went into default on
our loan agreement with our senior lender, Norwest Credit, Inc. relating to,
among other things, a requirement to have a minimum net worth, which we fell
below. We eventually entered into a settlement agreement with Norwest Credit,
Inc. in 1999. The terms of the settlement agreement required us to surrender our
inventory(which consisted primarily of snow skates) and related intellectual
property and to pay $280,000 in additional cash over a defined period. The cash
was paid in increments, with the final payment made on May 1, 1999. As of March
31, 1998, we should be considered to be essentially inactive and only minimally
capitalized.
HISTORY
Prior to our Bankruptcy reorganization, we had historically marketed,
manufactured and distributed Sled Dogs(TM) brand snow skates and related
accessories. The prototype to the snow skate was developed by Hannes Jacob, a
Swiss citizen. Mr. Jacob filed a U.S. patent application on his snow skate in
1988, subsequently filing corresponding patent applications in 20 countries. A
number of countries, including the U.S., have granted patents to Mr. Jacob. Mr.
Jacob also registered the trademark "SnowRunner" in 15 countries, including the
U.S. In February 1990, Mr. Jacob granted an exclusive world-wide license to the
patented technology and the SnowRunner trademark to DalBello Sport S.R.L., an
Italian company ("DalBello"), which developed a commercial snow skate and began
to market and manufacture snow skates on a limited basis. In 1991, our
predecessor secured exclusive U.S. distribution rights for the SnowRunner(R)
snow skate from DalBello.
After one season of product testing, we were able to expand our
operations by raising $1,125,000 from the sale of preferred stock. In September,
1993, through our wholly-owned subsidiary, SnowRunner (Properties) Inc., we
acquired from Mr. Jacob the patent rights, trademark rights and the rights to a
manufacturing agreement between Hannes Jacob and DalBello relating to the snow
skates. Other than holding such rights, SnowRunner (Properties) Inc. is inactive
and is expected to remain so. In exchange for such rights, we paid Mr. Jacob
$250,000 in cash and granted him a $4.00 per pair royalty payable until the
earlier of June 30,
<PAGE> 5
2003 or the date on which we would have paid an aggregate royalty of $2 million
to Mr. Jacob. At the same time that we acquired such rights, we canceled the
manufacturing agreement with DalBello, DalBello transferred all of the
product-specific assets used to manufacture the SnowRunner(R) snow skate to us
in exchange for 100,000 shares of our Common Stock plus a payment to DalBello by
us of $250,000. We also entered into manufacturing and product development
agreements with DalBello under which DalBello would continue to manufacture snow
skates exclusively for us.
In March 1994, we completed an initial public offering of 1,750,000
shares of common stock and received net proceeds of $7,101,862.
In November 1995, we sold 8,000,000 units (the "Units") in a private
placement, each Unit consisting of one share of common stock and one warrant to
purchase one share of common stock. The price per Unit was $.50. We received net
proceeds of $3,421,131 from the sale of the Units.
We were originally incorporated in Colorado under the name Snow Runner
(USA), Inc. in April 1991. In June 1991, our name was changed to Snow Runner
Holdings, Inc. We were the general partner of Snow Runner (USA) Ltd., a Colorado
limited partnership (the "Partnership"). Our organization was restructured in
July 1992. As part of the restructuring, the limited partners, including Nigel
Alexander and Steven Clarke (our founders), contributed their limited
partnership interests to us in exchange for stock in us. The Partnership then
transferred all of its assets to us and we assumed all the liabilities and
obligations of the Partnership. The Partnership was dissolved in August 1992 and
our name was changed to Snow Runner (USA) Inc. In late 1993, we relocated our
operations to Minnesota and, in January 1994, changed our name to SnowRunner,
Inc. In November 1994, we changed our name to The Sled Dogs Company.
In May, 1999, we changed our state of domicile to Nevada and our name
to Xdogs.com, Inc.
PROPOSED BUSINESS
As of March 31, 1998, we had limited operations. It is our intention to
develop into an internet seller of action sports hard goods and related apparel.
We also plan to become a leading consolidator in the highly-fragmented action
sporting goods industry. Our Management has an extensive background in mergers
and acquisitions. We plan to acquire a foundation of companies in the United
States and abroad that offer the range of products they can successfully market
on our website.
We believe that acquisition opportunities will remain plentiful, given
the size and fragmentation of the industry, especially with the tremendous
number of lifestyle owners and operators who do not have E-Commerce experience.
Our business model includes a decentralized management philosophy and a
centralized operating structure. Acquired companies and their management teams
will continue to manage the functions that "touch the customer" while the back
office functions (accounting, purchasing, etc.) will be managed at the corporate
<PAGE> 6
level. Our Management feels that it can successfully implement a unique
"Corporate Democracy" approach and hub and spoke strategy, and use this strategy
along with its E-Commerce model to increase operating efficiencies in an
industry historically plagued by low operating margins. The consolidation of
these companies would rapidly increase our growth, but could also result in
tremendous operating efficiencies.
The principles of "Corporate Democracy" include:
1. Operational control remains with the owners and managers
in-place prior to consolidation.
2. Retain local business identity to capitalize on the
goodwill generated in the marketplace by these lifestyle
oriented extreme hard good and related softgood/apparel
companies. We will strive to maintain the "cult-like"
attraction of the extreme companies we acquire, and promote
our trademark philosophy, "Life Without Limits".
3. Owners/managers will become significant shareholders by
taking common stock in the initial transaction and/or through
a stock option program. We will provide stock options to a
very large portion of the management base.
4. Enhance operating efficiencies and synergies. Although we
will be operating through a decentralized structure, our
Management will vigorously pursue opportunities to reduce
costs. Administrative functions will be combined (accounting,
insurance, employee benefits and legal support) redundant
facilities will be eliminated (as a result of the hub and
spoke operating strategy), systems and technology improvements
will be implemented and volume purchasing will be used.
We plan to pursue a two step approach to growth, which includes an
aggressive acquisition program that should complement and enhance internal
growth opportunities.
Our acquisition program is directed towards acquiring "Best of Class"
companies. Below are some of the characteristics we will review when evaluating
an acquisition:
1. Companies with a long term customer relationship, with a
recurring revenue stream.
2. Companies showing strong and consistent internal growth.
3. Platform acquisitions to build a national footprint - the
company is focused on establishing a national presence which
we can enhance with our E-Commerce model, whereby future
acquisitions within similar contiguous markets (the spokes).
<PAGE> 7
4. Companies with experienced management teams who take a
significant portion of consideration in stock.
5. Favorable trends in the marketplace of the acquisition
target.
6. Under penetrated market by the acquisition target.
COMPETITION
The operations in which we propose to engage will be extremely
competitive and subject to numerous risks. Selling on the Internet is new and
highly competitive, with many companies having access to the same market. The
profitability of this business is unproven. Further, the barriers to entry are
not substantial. It is expected that most, if not all of our potential
competitors have greater financial resources and longer operating histories
than ours and can be expected to compete within the business which we plan to
engage. We plan to use the Internet to give ourself the marketing edge to be
able to compete. Although we expect ultimately to be competitive in the markets
in which we compete, there can be no assurance that we will have the necessary
resources to be competitive.
PATENTS, TRADEMARKS, AND PROPRIETARY RIGHTS
We are the assignee of one U.S. patent, along with corresponding
patents from several other countries, covering structural aspects which are
incorporated into Sled Dogs snow skates. We had also filed U.S. and foreign
patent applications on certain aspects of its new K9 snow skate. We believe that
our patent rights are important to our business, and we intend to protect them
to the fullest extent practicable. No assurance can be given, however, that our
current or future patent rights will not be successfully challenged or
circumvented by competitors or that the other measures taken by us will prevent
the effective competition with its technologies. In addition, the strength of
the patent rights is uncertain and the cost to enforce its patent rights may
exceed our resources.
As of March 31, 1998, we owned registered trademarks "Extreme Dog" and
"the Extreme Dogs" logo with the U.S. Patent and Trademark Office. We had also
filed for U.S. trademark registration for the trademark "Life Without Limits".
While we are not aware of any conflicting trademark rights owned by other
parties, no assurance can be given that no such rights exist. We disposed of
certain of its registered marks as a result of our settlement agreement with
Norwest Credit, Inc. in 1999.
With respect to our foreign patent and trademark filings, no assurance
can be given that we will secure patent or trademark registrations in all
foreign countries in which applications are now pending or in which applications
are expected to be filed sometime in the future, or that we will maintain all
existing applications or registrations.
EMPLOYEES
<PAGE> 8
As of March 31, 1998, we had six employees, including one executive and
five staff members. At that time, our directors and officers managed our
corporate affairs. Since February 1, 1998, Mr. Rodriguez, our President, has
been accruing a monthly salary of $7,000, plus a $500 per month car allowance..
Otherwise, no officer or director is paid a salary. Our employees are not
represented by any collective bargaining organization.
RESEARCH AND DEVELOPMENT
Our expenditures for research and development activities amounted to $-0-
in 1997 and 1998.
FORWARD-LOOKING STATEMENTS
Forward-looking statements herein are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Certain
important factors could cause results to differ materially from those
anticipated by some statements made herein. You are cautioned that all
forward-looking statements involve risks and uncertainties. Among the factors
that could cause results to differ materially are the following: inability to
control costs or expenses; manufacturing and distribution problems; and lack of
market acceptance of our products.
ITEM 2. PROPERTIES
Our corporate office is located at 80 South Eight Street, Suite 3660,
Minneapolis, Minnesota 55402. This office space is leased from an unaffiliated
third party for $1700 per month on a lease ending December 31, 2003. We do not
plan to maintain manufacturing facilities. All manufacturing is planned to be
done by third party contractors.
ITEM 3. LEGAL PROCEEDINGS
As of March 31, 1998, we were in a dispute with Norwest Bank, Inc. This
dispute was settled in 1999. Otherwise, as of March 31, 1998, neither we, nor
any of our officers or directors, in their capacities as such were the subject
of any pending or threatened legal proceeding, and Management is not aware of
any contemplated action against us or such officers or directors.
We filed for protection under Chapter 11 of the U.S. Bankruptcy Code on
November 5, 1997. The Plan of Reorganization was approved on June 30, 1998; and
the Order and Final Decree closing the Chapter 11 case was issued on September
10, 1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of fiscal year 1998.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
<PAGE> 9
(a) Principal Market or Markets
Our Common Stock was listed on the NASDAQ Small Cap Market under the
symbol SNOW and on the Boston Stock Exchange under the symbol SNW. Effective
with the close of business on June 19, 1997, our Common Stock was delisted from
the NASDAQ Small Cap Market. After this date, we began trading on the NASD
Bulletin Board. Market makers and other dealers provided bid and ask quotations
of our Common Stock.
The table below represents the range of high and low bid quotations of
our Common Stock as reported during the reporting period herein. The following
bid price market quotations represent prices between dealers and do not include
retail markup, markdown, or commissions; hence, they may not represent actual
transactions.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Twelve Months Ended
March 31, 1997
First Quarter
Common Shares $1.25 $0.69
Second Quarter
Common Shares $1.34 $0.97
Third Quarter
Common Shares $1.03 $0.31
Fourth Quarter
Common Shares $0.50 $0.19
<CAPTION>
Fiscal Year ended 1998 High Low
---- ---
<S> <C> <C>
First Quarter
Common Shares $0.34 $0.06
Second Quarter $0.25 $0.07
Common Shares
Third Quarter $0.19 $0.02
Common Shares
Fourth Quarter $0.17 $0.02
</TABLE>
<PAGE> 10
Common Shares
(b) Approximate Number of Holders of Common Stock
As of March 31, 1998, a total of 13,513,193 shares of our Common Stock
were outstanding and the number of holders of record of our common stock at that
date was approximately 1,000. However, we estimate that it has a significantly
greater number of shareholders because a substantial number of our shares are
held in nominee names by our market makers.
(c) Dividends
Holders of common stock are entitled to receive such dividends as may
be declared by our Board of Directors. No dividends on the common stock were
paid by us during the periods reported herein nor do we anticipate paying
dividends on common stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
On November 5, 1997 We filed for protection under Chapter 11 of the
United States Bankruptcy Code. This filing permitted us to obtain Debtor In
Possession (DIP) financing from Norwest Business Credit, Inc. (Norwest). We
obtained $150,000 in DIP financing from Norwest on November 12, 1997. These
funds allowed us to implement a direct-sales program targeted at its primary
market of aggressive in-line skaters, at significantly lower prices than in past
years. In the past, we sold proprietary snow skates through big-box sporting
goods retailers and advertised its skates on the infomercial "Yellow Snow". This
direct sales program was significantly less expensive and specifically targeted
75,000 prospective buyers. The DIP financing from Norwest enabled us to fill
orders we previously had been unable to ship, due to our financial condition.
We changed our fiscal year end from June 30 to March 31, effective
March 31, 1997. The financial information for the period ended March 31, 1997 is
for a nine month period.
As of March 31, 1998, we had current assets of $6,424 and total assets
of $189,349. We had outstanding liabilities not subject to compromise of
$354,122, including an overdraft amount of $18,748, and liabilities subject to
compromise of $3,188,123.
We had total sales of $232,874, which came principally from the
liquidation of inventory. We had cost of goods sold of $1,104,189 and selling,
general, and administrative expenses of $1,265,733. Our net loss, which included
losses from continuing operations and reorganization items was $2,509,899, or a
loss of $0.19 per share.
We continue to work on generating additional cash and working capital
internally through the collection of existing receivables and sales of
excess/obsolete inventory. We have also taken
<PAGE> 11
steps to conserve cash such as: 1) Reducing the number of employees; and 2)
Significantly reducing fiscal 1998 planned expenses.
Our plan for the fiscal year ended March 31, 1999 is to continue the
restructuring of our operations, focus on developing our e-commerce presence,
and finalize our business plan.
LIQUIDITY AND CAPITAL RESOURCES
Our cash and cash equivalents were $6,424 on March 31, 1998, compared
to $11,542 on March 31, 1997. During the fiscal year ended March 31, 1998, our
operations used net cash of $1,141,050, primarily to fund operating losses and
accounts payable.
During the fiscal year ended March 31, 1998, our investing activities
used net cash of $47,193, primarily to purchase equipment and acquisition of
patents and trademarks.
Our financing activities for the fiscal year ended March 31, 1998
provided cash of $1,183,125, which consisted of $ 1,137,500 in net proceeds on
notes payable and an overdraw of $18,748 on our bank balance.
As of March 31, 1998, we were essentially insolvent and working toward
developing a reorganization plan.
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FORM 10-KSB ARE MADE PURSUANT TO
THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. CERTAIN
IMPORTANT FACTORS COULD CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE
ANTICIPATED BY SOME STATEMENTS MADE IN THIS FORM 10-KSB. AMONG THE FACTORS THAT
COULD CAUSE RESULTS TO DIFFER MATERIALLY ARE THE FOLLOWING: LACK OF AVAILABILITY
OF FINANCING; INABILITY TO CONTROL COSTS OR EXPENSES; MANUFACTURING AND
DISTRIBUTION PROBLEMS; AND LACK OF MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS.
REFERENCE IS ALSO MADE TO THE RISK FACTORS CONTAINED IN THE COMPANY'S
REGISTRATION STATEMENT ON FORM S-3 (NO. 33-80875), WHICH ARE INCORPORATED HEREIN
BY REFERENCE.
ITEM 7. FINANCIAL STATEMENTS
<PAGE> 12
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
(DEBTOR-IN-POSSESSION)
CONSOLIDATED FINANCIAL REPORT
MARCH 31, 1998
<PAGE> 13
CONTENTS
<TABLE>
- -------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT 1
- -------------------------------------------------------------------------------
<S> <C>
FINANCIAL STATEMENTS
Consolidated balance sheet 2
Consolidated statements of operations 3
Consolidated statements of changes in stockholders' deficit 4-5
Consolidated statements of cash flows 6
Notes to consolidated financial statements 7-14
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
XDogs.Com (formerly The Sled Dogs Company)
Minneapolis, Minnesota
We have audited the accompanying consolidated balance sheet of XDogs.Com
(formerly The Sled Dogs Company) as of March 31, 1998, and the related
consolidated statements of operations, changes in stockholders' deficit, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The consolidated
statements of operations, changes in stockholders' deficit, and cash flows for
the nine months ended March 31, 1997, of XDogs.Com (formerly The Sled Dogs
Company), were audited by other auditors, whose report, dated May 13, 1997, on
those financial statements included an explanatory paragraph that expressed
substantial doubt about the Company's ability to continue as a going concern.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of XDogs.Com
(formerly The Sled Dogs Company) as of March 31, 1998, and the consolidated
results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
As discussed in Note 1, on November 4, 1997, XDogs.Com (formerly The Sled Dogs
Company) filed a voluntary petition in the United States Bankruptcy Court for
the District of Minnesota for reorganization under Chapter 11 of the Bankruptcy
Code.
Minneapolis, Minnesota
October 22, 1999
1
<PAGE> 15
XDOGS.COM
(Formerly The Sled Dogs Company)
(Debtor-In-Possession)
CONSOLIDATED BALANCE SHEET
March 31, 1998
<TABLE>
<CAPTION>
ASSETS (Note 4)
<S> <C>
Current Assets
Cash $ 6,424
----------------
Total current assets 6,424
Equipment, net of accumulated depreciation of $339,008 182,925
----------------
Total assets $ 189,349
================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities Not Subject to Compromise
Checks in excess of bank balance $ 18,748
Accrued expenses 7,374
Debtor-in-possession note payable (Note 4) 328,000
----------------
Total current liabilities 354,122
Liabilities Subject to Compromise (Notes 3 and 8) 3,188,123
----------------
Total liabilities 3,542,245
----------------
Stockholders' Deficit (Notes 5 and 8)
Convertible preferred stock, Series A, $0.10 par value; authorized
shares--1,000,000; no issued or outstanding shares --
Common stock, $0.01 par value; authorized shares--20,000,000;
issued and outstanding shares 13,513,193 135,132
Additional paid-in capital 13,596,638
Accumulated deficit (17,084,666)
----------------
(3,352,896)
----------------
$ 189,349
================
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE> 16
XDOGS.COM
(Formerly The Sled Dogs Company)
(Debtor-In-Possession)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended March 31, 1998 and Nine Months Ended March 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Net sales $ 232,874 $ 1,463,467
Cost of goods sold (Note 7) 1,104,189 2,322,453
------------ ------------
Gross margin (871,315) (858,986)
Selling, general, and administrative expense 1,265,733 3,455,718
------------ ------------
Operating loss (2,137,048) (4,314,704)
Interest expense 159,972 77,580
Interest income (35) (22,469)
------------ ------------
Loss from continuing operations before
reorganization items (2,296,985) (4,369,815)
Reorganization items:
Legal fees 13,300 --
Debt issuance costs 91,250 --
Impairment of patents and trademarks 108,364 --
------------ ------------
Net loss $ (2,509,899) $ (4,369,815)
============ ============
Basic and diluted loss per common share $ (0.19) $ (0.33)
============ ============
Weighted-average number of common and
common equivalent shares outstanding 13,513,193 13,265,220
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 17
XDOGS.COM
(Formerly The Sled Dogs Company)
(Debtor-In-Possession)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
Year Ended March 31, 1998 and Nine Months Ended March 31, 1997
<TABLE>
<CAPTION>
Common Stock
---------------------------
Shares Amount
------------ ------------
<S> <C> <C>
Balance at June 30, 1996 11,749,999 $ 117,500
Warrants exercised 1,763,194 17,632
Net loss for the nine-month period ended March 31, 1997 -- --
------------ ------------
Balance at March 31, 1997 13,513,193 135,132
Net loss for the year ended March 31, 1998 -- --
------------ ------------
Balance at March 31, 1998 13,513,193 $ 135,132
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 18
<TABLE>
<CAPTION>
Total
Convertible Preferred Stock Additional Stockholders'
--------------------------- Paid-In Accumulated Equity
Shares Amount Capital Deficit (Deficit)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1996 -- $ -- $ 12,291,874 $(10,204,952) $ 2,204,422
Warrants exercised -- -- 1,304,764 -- 1,322,396
Net loss for the nine-month period ended
March 31, 1997 -- -- -- (4,369,815) (4,369,815)
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1997 -- -- 13,596,638 (14,574,767) (842,997)
Net loss for the year ended March 31, 1998 -- -- -- (2,509,899) (2,509,899)
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1998 -- $ -- $ 13,596,638 $(17,084,666) $ (3,352,896)
============ ============ ============ ============ ============
</TABLE>
5
<PAGE> 19
XDOGS.COM
(Formerly The Sled Dogs Company)
(Debtor-In-Possession)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended March 31, 1998 and Nine Months Ended March 31, 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities
Net loss $(2,509,899) $(4,369,815)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 196,507 290,812
Impairment loss on patents and trademarks 119,313 --
Loss on asset disposals 41,792 316,953
Changes in operating assets and liabilities:
Receivables 225,168 124,186
Other receivables -- 34,402
Inventories 940,226 (246,146)
Prepaid expenses 23,385 145,329
Accounts payable 206,174 930,022
Other accrued expenses (383,716) 404,274
----------- -----------
Net cash used in operating activities (1,141,050) (2,369,983)
----------- -----------
Cash Flows From Investing Activities
Purchases of equipment (30,395) (311,644)
Acquisition of patents and trademarks (16,798) (27,446)
Proceeds from sale of property and equipment -- 2,867
----------- -----------
Net cash used in investing activities (47,193) (336,223)
----------- -----------
Cash Flows From Financing Activities
Net proceeds from sale of common stock -- 1,322,396
Proceeds on notes payable 1,137,500 --
Payments on notes payable (45,000) --
Net change in payable to banks 71,877 592,101
Checks in excess of bank balance 18,748 150,000
----------- -----------
Net cash provided by financing activities 1,183,125 2,064,497
----------- -----------
Net decrease in cash (5,118) (641,709)
Cash
Beginning 11,542 653,251
----------- -----------
Ending $ 6,424 $ 11,542
=========== ===========
Supplemental Disclosures of Cash Flow Information
Cash paid for interest $ 93,611 $ 77,580
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 20
NOTE 1. PETITION FOR RELIEF UNDER CHAPTER 11
REORGANIZING AND BASIS OF REPORTING: On November 4, 1997, XDogs.Com (formerly
The Sled Dogs Company) (the Company) filed a voluntary petition in the United
States Bankruptcy Court for the District of Minnesota for reorganization under
Chapter 11 of the Bankruptcy Code. At March 31, 1998, the Company was operating
its business as a debtor-in-possession under the protection of the Bankruptcy
Court.
On June 30, 1998, following approval by creditors, the Bankruptcy Court
confirmed the Company's plan of reorganization, and the plan became effective 30
days later.
The Company has accounted for all transactions related to the reorganization
proceedings in accordance with Statement of Position 90-7, Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code, issued by the American
institute of Certified Public Accountants in November 1990. Accordingly, all
prepetition liabilities of the Company that are subject to compromise under the
plan of reorganization ultimately approved by the Bankruptcy Court are
segregated in the Company's consolidated balance sheets as "liabilities subject
to compromise." These liabilities are recorded at the amounts subject to
settlement under the plan of reorganization filed with the Bankruptcy Court.
Interest expense on unsecured and undersecured obligations ceased to accrue at
the Petition Date. See Note 3 for a summary of Liabilities Subject to
Compromise.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND DESCRIPTION OF BUSINESS: The Company was incorporated in
Colorado in 1991 as a distributor of SnowRunner snow skates. Between 1991 and
1994, the Company was restructured, and the name of the Company was changed
several times, including such names as SnowRunner (USA) Inc., SnowRunners, Inc.,
and The Sled Dogs Company.
As discussed in Note 1, the Company filed for bankruptcy protection in 1997. As
a result of the bankruptcy, the Company was reorganized and in 1999 was renamed
XDogs.Com.
CONSOLIDATION: The financial statements include the accounts of the Company and
its wholly owned subsidiary, SnowRunner (Properties) Inc., which was established
and incorporated in April 1993. The subsidiary was inactive during the periods
ended March 31, 1998 and 1997.
FISCAL YEAR: In September 1996, the Company elected to change its fiscal
year-end from June 30 to March 31 effective March 31, 1997. The Company's
consolidated financial statements and notes thereto include the Company's
results of operations and cash flows for the nine-month period from July 1, 1996
through March 31, 1997.
EQUIPMENT: Equipment is stated at cost. Depreciation is computed using a
straight-line method over the estimated useful lives of the equipment, which
range from three to six years.
7
<PAGE> 21
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES: Deferred taxes are provided on an asset and liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carryforwards, and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
LOSS PER SHARE: The Company computes basic and diluted net loss per share based
upon the weighted-average number of common shares outstanding during each year.
Net loss per common share for the year and nine months ended March 31, 1998 and
1997, does not include any common stock equivalents, as they are antidilutive.
IMPAIRMENT OF LONG-LIVED ASSETS: The Company will record impairment losses on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amounts.
During the last quarter in the year ended March 31, 1998, it was determined that
the patents and trademarks capitalized were considered impaired based on the
future cash flows over the remaining amortization period being less than the
assets' carrying amounts. The total amount of the write-off was approximately
$119,000 and is primarily recorded as a reorganization item.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FAIR VALUE: The Company's financial instruments consist of cash for which the
current carrying amount approximates fair value.
NOTE 3. LIABILITIES SUBJECT TO COMPROMISE
As a result of the Chapter 11 proceedings, all unsecured and undersecured
prepetition liabilities were reclassified to liabilities subject to compromise
at March 31, 1998. Substantially all of these claims were settled in fiscal 1999
in accordance with the Plan of Reorganization (see Note 8). The liabilities
subject to compromise at March 31, 1998, consisted of the following:
<TABLE>
<S> <C>
Trade and other miscellaneous claims $1,653,623
Secured debt 367,000
Senior noteholders 355,000
Subordinated debentures 812,500
----------
$3,188,123
==========
</TABLE>
8
<PAGE> 22
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. DEBTOR-IN-POSSESSION NOTE PAYABLE
The Company has a demand note payable to a bank with interest at 15 percent. The
debtor-in-possession financing is secured by all assets of the Company and the
personal guaranty of an officer of the Company.
NOTE 5. STOCK OPTIONS AND WARRANTS
On July 25, 1992, the Company adopted the SnowRunner, Inc. Stock Option Plan,
which was amended in October 1996 (the Plan). Under the Plan, the Company has
reserved 2,160,000 shares of common stock for issuance to key employees and
others as either incentive-based options or nonqualified options. Under the
Plan, incentive stock options may be granted at prices not less than the fair
market value of the Company's common stock at the grant date. Nonqualified
options may be granted at prices less than the fair market value of the
Company's common stock. The options are outstanding for 10 years following the
date of grant.
The following table summarizes the option transactions under the Plan for the
years ended March 31, 1997 and 1998:
<TABLE>
<CAPTION>
Weighted-
Average
Exercise
Price Per
Total Share
----------- ---------
<S> <C> <C>
Outstanding as of June 30, 1996 $ 1,448,059 1.34
Granted 924,000 1.06
Canceled (1,005,700) 1.70
-----------
Outstanding as of March 31, 1997 1,366,309 0.73
Granted 1,883,000 0.06
Canceled (1,366,309) 0.73
-----------
Outstanding as of March 31, 1998 $ 1,883,000 0.06
===========
</TABLE>
All outstanding options were canceled in connection with the bankruptcy.
9
<PAGE> 23
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. STOCK OPTIONS AND WARRANTS (CONTINUED)
The Company, in 1997 and prior years, issued warrants in connection with loan
agreements and with debt and equity offerings to purchase shares of common
stock. In 1998, substantially all warrants were issued primarily to employees
and directors. Warrant activity is summarized as follows:
<TABLE>
<CAPTION>
Warrants
Outstanding
and Price Per Expiration
Exercisable Share Date
----------- -------------- ---------
<S> <C> <C> <C>
Balance at June 30, 1996 8,685,000 $ 0.30 - 7.60 1999-2005
Warrants granted 60,000 0.38 - 1.00 2000-2001
Warrants exercised (1,763,194) 0.75
---------- --------------
Balance at March 31, 1997 6,981,806 0.30 - 7.60 1999-2005
Warrants granted 7,265,000 0.03 - 0.06 2002
---------- --------------
Balance at March 31, 1998 14,246,806 $ 0.03 - 7.60
========== ==============
</TABLE>
All outstanding warrants were canceled in conjunction with the bankruptcy.
The weighted-average fair value of options and warrants granted during the year
ended March 31, 1998, was $0.12 per share.
PRO FORMA DISCLOSURES: Pro forma information regarding net loss and loss per
share is required by Statement of Financial Accounting Standards No. 123 and has
been determined as if the Company had accounted for its employee stock options
and warrants under the fair value method of that statement. The fair value for
these options and warrants was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1999 and 1998, respectively: a risk-free interest rate of 6.47
percent; no dividend yield; a volatility factor of the expected market price of
the Company's common stock of 223.82 percent; and a weighted-average expected
life of the options and warrants of five years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company's employee stock options and warrants have characteristics
significantly different from those of traded options and warrants, and because
changes in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options and warrants.
10
<PAGE> 24
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. STOCK OPTIONS AND WARRANTS (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the options
and warrants is amortized to expense over the options and warrants' vesting
period. The Company's pro forma information follows:
<TABLE>
<CAPTION>
March 31
-----------------------------
1998 1997
------------- -------------
<S> <C> <C>
Net loss as reported $ 2,509,899 $ 4,369,815
Pro forma net loss 3,477,131 4,684,627
Loss per share as reported 0.19 0.33
Pro forma loss per share 0.26 0.35
</TABLE>
NOTE 6. INCOME TAXES
At March 31, 1998, the Company has accumulated a net operating loss of
approximately $13,700,000 which may be used to reduce future taxable income
through 2013. A valuation allowance has been recognized to completely reserve
for the deferred tax assets related to the loss carryforwards. The reserve has
been established because of the uncertainty of future taxable income, which is
necessary in order to realize the benefits of the net operating loss
carryforwards. Any tax benefits realized in the future from preconfirmation
operating loss carryforwards will be reported as a direct addition to additional
paid-in capital.
The Company's ability to utilize these carryforwards to offset future taxable
income is subject to certain restrictions under Section 382 of the Internal
Revenue Code due to certain changes in the equity ownership of the Company.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes. Components of the Company's
deferred tax assets are:
<TABLE>
<CAPTION>
March 31
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Allowances $ -- $ 365,000
Net operating loss carryforward 5,480,000 4,675,000
----------- -----------
Total deferred tax assets 5,480,000 5,040,000
----------- -----------
Less valuation allowance (5,480,000) (5,040,000)
Net deferred tax assets $ -- $ --
=========== ===========
</TABLE>
11
<PAGE> 25
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. INCOME TAXES (CONTINUED)
Loss carryforwards for tax purposes as of March 31, 1998, have the following
expiration dates:
<TABLE>
<CAPTION>
Expiration Date Amount
- --------------- ------------
<S> <C>
2009 $ 2,030,000
2010 2,970,000
2011 3,210,000
2012 2,990,000
2013 2,500,000
------------
$ 13,700,000
============
</TABLE>
NOTE 7. INVENTORY
During the last quarter of year ended March 31, 1998, an inventory write-down of
approximately $825,000 was recorded as a result of the bankruptcy and
discontinued future sales efforts of the Company of the products in inventory.
The write-down of the inventory is recorded as additional cost of goods sold.
NOTE 8. SUBSEQUENT EVENTS
As discussed in Note 1, on June 30, 1998, following approval by creditors, the
Bankruptcy Court confirmed the Company's plan of reorganization and the plan
became effective 30 days later.
Under the terms of the plan, the allowed claims are being settled as follows:
PRIORITY CLAIMS: Wage and salary claims of the Company's employees totaling
approximately $6,000 were to be paid in cash.
SECURED DEBT: The Company's approximately $367,000 asset-based line of credit
was exchanged for new debt in the same amount plus the surrender of equipment
with a carrying value of $150,557.
SENIOR NOTEHOLDERS: The holders of $355,000 of senior secured notes received
2.15 shares of common stock for every dollar of debt held by the senior
noteholder. The total number of shares issued was 763,250.
SUBORDINATED DEBENTURES: The holders of $812,500 of subordinated debentures
received 0.92 shares of common stock for every dollar of debt held. The total
number of shares issued was 747,500.
UNSECURED CREDITORS: The holders of approximately $727,000 of allowed trade and
other miscellaneous claims received 0.2666 shares of common stock for every
dollar of debt held. The total number of shares issued was 193,863. In addition,
approximately $32,000 in debt was paid in cash. Trade and other miscellaneous
claims of approximately $888,500 were not allowed.
12
<PAGE> 26
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. SUBSEQUENT EVENTS (CONTINUED)
COMMON STOCK: The holders of the Company's existing common stock received, in
exchange for their shares, one share of the new issue of outstanding voting
common stock of the Company for each 54 shares owned at the effective date of
the reorganization. The loss per common share for the year and nine months ended
March 31, 1998 and 1997, has not been retroactively adjusted for the split in
these consolidated financial statements.
OPTIONS AND WARRANTS: All existing options and warrants of the Company
authorized, issued, or outstanding on the effective date of the bankruptcy were
canceled.
FRESH-START ACCOUNTING: In accordance with SOP 90-7, the Company will account
for the reorganization using fresh-start accounting. SOP 90-7 is applicable
because pre-reorganization shareholders will receive less than 50 percent of the
Company's New Common Stock, and the reorganization value of the assets of the
reorganized Company is less than the total of all post-petition liabilities and
allowed claims.
Under fresh-start accounting, all assets and liabilities are restated to reflect
their reorganization value, which approximates fair value at the date of
reorganization. Accordingly, all allowances for doubtful accounts, accumulated
depreciation and amortization, and asset reserves will be reduced to $-0- at
June 30, 1998. In accordance with fresh-start accounting, the gain on
forgiveness of debt resulting from the bankruptcy proceedings will be reflected
on the predecessor Company's statement of operations for the three months ended
June 30, 1998. In addition, the retained deficit of the predecessor Company at
June 30, 1998, totaling $14,519,354, was eliminated, and at July 1, 1998, the
reorganized Company's financial statements will reflect no beginning retained
earnings or deficit.
The reorganization value of the reorganized Company was determined in
consideration of several factors. Management believes the estimated fair value
of the emerging entity before considering liabilities approximates the amount a
willing buyer would pay for the assets of the entity immediately after the
restructuring. The Company determined that the fair value of the assets at June
30, 1998, approximated carrying value and, therefore, recognized no
reorganization value in excess of amounts allocable to identifiable assets.
As a result of the implementation of fresh-start accounting, the consolidated
financial statements of the Company after consummation of the plan are not
comparable to the Company's consolidated financial statements of prior periods.
13
<PAGE> 27
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. SUBSEQUENT EVENTS (CONTINUED)
The effect of the plan and the implementation of fresh-start accounting on the
Company's consolidated balance sheet as of June 30, 1998 will be as follows
(unaudited):
<TABLE>
<CAPTION>
Pre-Fresh-Start Adjustments to Fresh-Start
Balance Sheet, Record Plan Fair Value Balance Sheet,
June 30, 1998 Confirmation Adjustments June 30, 1998
--------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Cash $ 13,249 $ $ -- $ 13,249
Equipment 150,557 (150,557)
----------- ----------- ----------- -----------
$ 163,806 $ (150,557) $ -- $ 13,249
=========== =========== =========== ===========
Liabilities $ 3,516,123 $(2,783,122) $ -- $ 733,001
Stockholders' deficit (3,352,317) 2,632,565 -- (719,752)
----------- ----------- ----------- -----------
$ 163,806 $ (150,557) $ -- $ 13,249
=========== =========== =========== ===========
</TABLE>
CHANGE IN BUSINESS: Subsequent to year-end the Company changed the business of
the Company. The intent of the Company is to develop into a "clicks and mortar"
seller of action sports hard goods and related apparel and to create an Internet
destination site for active outdoor lifestyle enthusiasts. In addition, in 1999,
the Company has signed a distribution agreement with Berghaus International to
become their North American distributor. Berghaus International is a
manufacturer of outdoor sporting goods, including performance clothing,
footwear, and equipment.
STOCK OFFERINGS: During fiscal years 1999 and 2000, the Company completed
private offerings of common stock at prices ranging from $0.25 to $1.50 per
share. The total number of shares issued in conjunction with the offerings was
2,543,595, with proceeds of approximately $1,135,000, net of offering costs and
commissions of approximately $109,000.
STOCK ISSUANCES: The Company had various issuances of stock during fiscal years
1999 and 2000. These included 1,695,819 shares of common stock issued in
conjunction with the bankruptcy. In addition, the Company issued 3,639,102
shares of common stock in lieu of cash for various expenses and debt
restructuring.
14
<PAGE> 28
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
CONSOLIDATED FINANCIAL REPORT
MARCH 31, 1999
<PAGE> 29
CONTENTS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT 1
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
Consolidated balance sheet 2
Consolidated statements of operations 3
Consolidated statements of changes in stockholders' deficit
4
Consolidated statements of cash flows 5 - 6
Notes to consolidated financial statements 8 - 11
- --------------------------------------------------------------------------------
<PAGE> 30
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
XDogs.Com (Formerly The Sled Dogs Company)
Minneapolis, Minnesota
We have audited the accompanying consolidated balance sheet of XDogs.Com
(formerly The Sled Dogs Company) as of March 31, 1999, and the related
consolidated statements of operations, changes in stockholders' deficit, and
cash flows for the nine months ended March 31, 1999, the three months ended June
30, 1998, and the year ended March 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of XDogs.Com
(formerly The Sled Dogs Company) as of March 31, 1999, and the consolidated
results of its operations and its cash flows for the nine months ended March 31,
1999, the three months ended June 30, 1998, and the year ended March 31, 1998,
in conformity with generally accepted accounting principles.
On June 30, 1998, the Company emerged from bankruptcy. As discussed in Note 2 to
the consolidated financial statements, the Company accounted for the
reorganization using fresh-start reporting. Thus, the postreorganization
consolidated financial statements are not comparable to the prereorganization
consolidated financial statements.
MCGLADREY & PULLEN, LLP
Minneapolis, Minnesota
October 22, 1999
1
<PAGE> 31
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
Reorganized
ASSETS Company
- -------------------------------------------------------------------------------------------
<S> <C>
Current Assets
Cash $ 86,919
Prepaid expenses 17,333
------------
TOTAL CURRENT ASSETS 104,252
------------
TOTAL ASSETS $ 104,252
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Liabilities Not Subject to Compromise
Accounts payable $ 17,150
Liabilities Subject to Compromise (Notes 1 and 4) 32,438
------------
TOTAL CURRENT LIABILITIES 49,588
------------
Stockholders' Deficit (Notes 1, 2, and 5)
Convertible preferred stock, Series A, $0.10 par value; authorized
shares--1,000,000; no issued or outstanding shares
Common stock, $0.01 par value; authorized shares--20,000,000;
issued and outstanding shares 1999: 6,604,625; 1998: 250,244 66,046
Additional paid-in capital 513,828
Common stock paid for but not issued 564,514
Accumulated deficit (1,089,724)
------------
54,664
------------
$ 104,252
============
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE> 32
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1999, THREE MONTHS
ENDED JUNE 30, 1998, AND YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
REORGANIZED Predecessor Company
COMPANY, -------------------------------
NINE MONTHS Three Months
ENDED Ended Year Ended
MARCH 31, 1999 June 30, 1998 March 31, 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 34,829 $ 10,940 $ 232,874
Cost of goods sold -- -- 1,104,189
------------ ------------ ------------
GROSS MARGIN 34,829 10,940 (871,315)
Selling, general, and administrative expense 545,739 10,362 1,265,733
------------ ------------ ------------
OPERATING INCOME (LOSS) (510,910) 578 (2,137,048)
Interest expense 84,620 -- 159,972
Interest income -- -- (35)
------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
REORGANIZATION ITEMS AND EXTRAORDINARY ITEMS (595,530) 578 (2,296,985)
Reorganization items:
Guaranty fee (Note 7) 843,500 -- --
Legal fees 53,319 -- 13,300
Debt issuance costs -- -- 91,250
Impairment of patents and trademarks -- -- 108,364
------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS (1,492,349) 578 (2,509,899)
Extraordinary items:
Extraordinary gain on discharge of prepetition liabilities -- 2,564,734 --
Extraordinary gain on debt extinguishment (Note 8) 402,625 -- --
------------ ------------ ------------
NET INCOME (LOSS) $ (1,089,724) $ 2,565,312 $ (2,509,899)
============ ============ ============
Basic and diluted earnings (loss) per common share:
Income (loss) before extraordinary item $ (0.49) $ -- $ (10.03)
Extraordinary items 0.13 9.90 --
------------ ------------ ------------
NET INCOME (LOSS) $ (0.36) $ 9.90 $ (10.03)
============ ============ ============
Weighted-average number of common shares outstanding 3,042,768 259,038 250,244
============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 33
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
NINE MONTHS ENDED MARCH 31, 1999, THREE MONTHS
ENDED JUNE 30, 1998, AND YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
Common Stock Convertible Preferred Stock Additional
-------------------------- --------------------------- Paid-In
Shares Amount Shares Amount Capital
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1997 250,244 $ 2,502 -- $ -- $ 13,729,268
Net loss for the year ended March 31, 1998 -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1998 250,244 2,502 -- -- 13,729,268
Common stock issued, bankruptcy (Note 1) 1,704,613 17,046 -- -- 50,786
Net income for the three months ended June 30, 1998 -- -- -- -- --
Fresh-start accounting, bankruptcy (Note 2) -- -- -- -- (13,780,054)
------------ ------------ ------------ ------------ ------------
Balance at June 30, 1998 1,954,857 19,548 -- -- --
Common stock issued for services 3,089,102 30,891 -- -- --
Private issuance of common stock in December 1998;
January, February, and March 1999 at $0.25 per
share, net of stock issuance costs of $48,000 974,000 9,740 -- -- --
Private issuance of common stock in January 1999 20,000 200 -- -- --
Private issuance of common stock in January 1999 16,666 167 -- -- --
Common stock issued in connection with debt
extinguishment (Note 8) 50,000 500 -- -- --
Common stock issued in connection with guaranty
fee (Note 7) 500,000 5,000 -- -- 513,828
Common stock to be issued, net of commissions of
$13,901 (Note 5) -- -- -- -- --
Net loss for the nine months ended March 31, 1999 -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1999 6,604,625 $ 66,046 -- $ -- $ 513,828
============ ============ ============ ============ ============
<CAPTION>
Total
Common Stock Stockholders'
Discount Paid for, but Accumulated Equity
on Shares Not Issued Deficit (Deficit)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at March 31, 1997 $ -- $ -- (14,574,767) $ (842,997)
Net loss for the year ended March 31, 1998 -- -- (2,509,899) (2,509,899)
------------ ------------ ------------ ------------
Balance at March 31, 1998 -- -- (17,084,666) (3,352,896)
Common stock issued, bankruptcy (Note 1) -- -- -- 67,832
Net income for the three months ended June 30, 1998 -- -- 2,565,312 2,565,312
Fresh-start accounting, bankruptcy (Note 2) (739,300) -- 14,519,354 --
------------ ------------ ------------ ------------
Balance at June 30, 1998 (739,300) -- -- (719,752)
Common stock issued for services 128,385 -- -- 159,276
Private issuance of common stock in December 1998;
January, February, and March 1999 at $0.25 per
share, net of stock issuance costs of $48,000 185,760 -- -- 195,500
Private issuance of common stock in January 1999 7,800 -- -- 8,000
Private issuance of common stock in January 1999 8,833 -- -- 9,000
Common stock issued in connection with debt
extinguishment (Note 8) 83,850 -- -- 84,350
Common stock issued in connection with guaranty
fee (Note 7) 324,672 -- -- 843,500
Common stock to be issued, net of commissions of
$13,901 (Note 5) -- 564,514 -- 564,514
Net loss for the nine months ended March 31, 1999 -- -- (1,089,724) (1,089,724)
------------ ------------ ------------ ------------
Balance at March 31, 1999 $ -- $ 564,514 (1,089,724) $ 54,664
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 34
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1999, THREE MONTHS
ENDED JUNE 30, 1998, AND YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
REORGANIZED
COMPANY, Predecessor Company
NINE MONTHS -------------------------------
ENDED Three Months Year Ended
MARCH 31, 1999 Ended March 31,
June 30, 1998 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ (1,089,724) $ 2,565,312 $ (2,509,899)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Extraordinary items (402,625) (2,564,734) --
Depreciation and amortization -- 32,369 196,507
Noncash expense related to stock issued (Note 7) 1,002,776 -- --
Impairment loss on patents and trademarks -- -- 119,313
Loss on asset disposals -- -- 41,792
Changes in operating assets and liabilities:
Receivables -- -- 225,168
Inventories -- -- 940,226
Prepaid expenses (17,333) -- 23,385
Accounts payable 17,150 -- 206,174
Other accrued expenses 79,618 (7,374) (383,716)
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (410,138) 25,573 (1,141,050)
------------ ------------ ------------
Cash Flows From Investing Activities
Purchases of equipment -- -- (30,395)
Acquisition of patents and trademarks -- -- (16,798)
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES -- -- (47,193)
------------ ------------ ------------
Cash Flows From Financing Activities
Net proceeds from sale of common stock 777,014 -- --
Proceeds on notes payable -- -- 1,137,500
Payments on notes payable and debtor-in-possession note (293,206) -- (45,000)
Net change in payable to banks -- -- 71,877
Cash in excess of bank balance -- (18,748) 18,748
------------ ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 483,808 (18,748) 1,183,125
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 73,670 6,825 (5,118)
Cash
Beginning 13,249 6,424 11,542
------------ ------------ ------------
Ending $ 86,919 $ 13,249 $ 6,424
============ ============ =============
</TABLE>
5
<PAGE> 35
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1999, THREE MONTHS
ENDED JUNE 30, 1998, AND YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
REORGANIZED
COMPANY, Predecessor Company
NINE MONTHS -------------------------------
ENDED Three Months Year Ended
MARCH 31, 1999 Ended March 31,
June 30, 1998 1998
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental Disclosures of Cash Flow Information
Cash paid for interest $ -- $ -- $ 93,611
============ ============ =============
Supplemental Schedule of Noncash Investing and Financing Activities (see Note 1
for discussion of noncash activity related to the reorganization)
Common stock issued relating to prepetition liabilities $ -- $ 67,832 $ --
Equipment surrendered -- 150,557 --
Common stock issued in connection with settlement of debt (Note 8) 84,350 -- --
============ ============ =============
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 36
NOTE 1. REORGANIZATION
On November 4, 1997, XDogs.Com (formerly The Sled Dogs Company) (the Company)
filed voluntary petitions in the United States Bankruptcy Court for the District
of Minnesota for reorganization under Chapter 11 of the Bankruptcy Code. On June
30, 1998, following approval by creditors, the Bankruptcy Court confirmed the
Company's plan of reorganization, and the plan became effective 30 days later.
During the period from November 4, 1997, through June 30, 1998, the Company
operated as debtor-in-possession.
Under the terms of the plan, the allowed claims are being settled as follows:
PRIORITY CLAIMS: Wage and salary claims of the Company's employees totaling
approximately $6,000 were paid in cash.
SECURED DEBT: The Company's approximately $367,000 asset-based line of credit
was exchanged for new debt in the same amount plus the surrender of equipment
with a carrying value of $150,557.
SENIOR NOTEHOLDERS: The holders of $355,000 of senior secured notes received
2.15 shares of common stock for every dollar of debt held by the senior
noteholder. The total number of shares issued was 763,250.
SUBORDINATED DEBENTURES: The holders of $812,500 of subordinated debentures
received 0.92 shares of common stock for every dollar of debt held. The total
number of shares issued was 747,500.
UNSECURED CREDITORS: The holders of approximately $727,000 of allowed trade and
other miscellaneous claims received 0.2666 shares of common stock for every
dollar of debt held. The total number of shares issued was 193,863. In addition,
approximately $32,000 in debt was paid in cash. Trade and other miscellaneous
claims of approximately $888,500 were not allowed.
COMMON STOCK: The holders of the Company's existing common stock received, in
exchange for their shares, one share of the new issue of outstanding voting
common stock of the Company for each 54 shares owned at the effective date of
the reorganization.
OPTIONS AND WARRANTS: All existing options and warrants of the Company
authorized, issued, or outstanding on the effective date of the bankruptcy were
canceled.
The Company accounted for the reorganization using fresh-start accounting.
Accordingly, all assets and liabilities are restated to reflect their
reorganization value, which approximates fair value at the date of
reorganization. See Note 2.
7
<PAGE> 37
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2. FRESH-START REPORTING
In accounting for the effects of the reorganization, the Company has implemented
Statement of Position 90-7 (SOP 90-7), Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code, issued by the American Institute of
Certified Public Accountants in November 1990. SOP 90-7 is applicable because
pre-reorganization shareholders will receive less than 50 percent of the
Company's New Common Stock, and reorganization value of the assets of the
reorganized Company is less than the total of all post-petition liabilities and
allowed claims.
Under fresh-start accounting, all assets and liabilities are restated to reflect
their reorganization value, which approximates fair value at the date of
reorganization. In accordance with fresh-start accounting, the gain on
forgiveness of debt resulting from the bankruptcy proceedings was reflected on
the predecessor Company's statement of operations for the three months ended
June 30, 1998. In addition, the retained deficit of the predecessor Company at
June 30, 1998, totaling $14,519,354, was eliminated, and at July 1, 1998, the
reorganized Company's financial statements reflected no beginning retained
earnings or deficit.
The reorganization value of the reorganized Company was determined in
consideration of several factors. Management believes the estimated fair value
of the emerging entity before considering liabilities approximates the amount a
willing buyer would pay for the assets of the entity immediately after the
restructuring. The Company determined that the fair value of the assets at June
30, 1998, approximated carrying value and, therefore, recognized no
reorganization value in excess of amounts allocable to identifiable assets.
As a result of the implementation of fresh-start accounting, the consolidated
financial statements of the Company after consummation of the plan are not
comparable to the Company's consolidated financial statements of prior periods.
The effect of the plan and the implementation of fresh-start accounting on the
Company's consolidated balance sheet as of June 30, 1998, was as follows
(unaudited):
<TABLE>
<CAPTION>
Pre-Fresh-Start Adjustments to Fresh-Start
Balance Sheet, Record Plan Fair Value Balance Sheet,
June 30, 1998 Confirmation Adjustments June 30, 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash $ 13,249 $ -- $ -- $ 13,249
Equipment 150,557 (150,557) -- --
------------ ------------ ------------ ------------
$ 163,806 $ (150,557) $ -- $ 13,249
============ ============ ============ ============
Liabilities $ 3,516,123 $ (2,783,122) $ -- $ 733,001
Stockholders' deficit (3,352,317) 2,632,565 -- (719,752)
------------ ------------ ------------ ------------
$ 163,806 $ (150,557) $ -- $ 13,249
============ ============ ============ ============
</TABLE>
8
<PAGE> 38
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS: The Company was incorporated in Colorado in 1991 as a
distributor of SnowRunner snow skates. Between 1991 and 1994, the Company was
restructured, and the name of the Company was changed several times, including
such names as SnowRunner (USA) Inc., SnowRunners, Inc., and The Sled Dogs
Company.
As discussed in Note 1, the Company filed for bankruptcy protection in 1997. As
a result of the bankruptcy, the Company was reorganized and in 1999 was renamed
XDogs.Com. The intent of the Company is to develop into a "clicks and mortar"
seller of action sports hard goods and related apparel and to create an Internet
destination site for active outdoor lifestyle enthusiasts. In addition, in 1999
the Company has signed a distribution agreement with Berghaus International to
become their North American distributor. Berghaus International is a
manufacturer of outdoor sporting goods, including performance clothing,
footwear, and equipment.
Revenues on the accompanying statements of operations are from sources other
than Internet sales. The Company has not generated any revenues as an Internet
seller of action sporting goods. The Company's ability to generate revenues from
operations and achieve profitability is dependent upon a number of factors,
including acceptance in the United States of the European products. The ability
to continue as a going concern is ultimately dependent upon the Company's
ability to generate additional financing and to generate revenues and
profitability. An officer of the Company has agreed to assist with funding of
short-term cash needs through March 2000.
CONSOLIDATION: The financial statements include the accounts of the Company and
its wholly owned subsidiary, SnowRunner (Properties) Inc., which was established
and incorporated in April 1993. The subsidiary was inactive in fiscal 1999 and
1998.
CASH: The Company maintains deposits at banks which, at times, exceed federally
insured limits. The Company has not experienced any losses in such accounts.
DISCOUNT ON SHARES: Discount on shares represents the amount by which the
liabilities exceeded the fair value of the assets when applying fresh-start
accounting (see Note 2).
INCOME TAXES: Deferred taxes are provided on an asset and liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carryforwards, and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
basis. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
LOSS PER SHARE: The Company computes net loss per share based upon the
weighted-average number of common shares outstanding during each year. As of
March 31, 1999, the Company had no common stock equivalents.
9
<PAGE> 39
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FAIR VALUE: The Company's financial instruments consist of cash for which the
current carrying amount approximates fair value.
NOTE 4. LIABILITIES SUBJECT TO COMPROMISE
As a result of the Chapter 11 proceedings, all unsecured and undersecured
prepetition liabilities were reclassified to liabilities subject to compromise
at March 31, 1998. Substantially all of these claims were settled in fiscal 1999
in accordance with the Plan of Reorganization (see Note 1). The liabilities
subject to compromise at March 31, 1999, consisted of the following:
Trade and other miscellaneous claims $ 32,438
NOTE 5. COMMON STOCK AND SUBSEQUENT EVENTS
STOCK SPLIT: In conjunction with the bankruptcy, the Company effected a 54-for-1
reverse common stock split. The earnings per common share for the years ended
March 31, 1999 and 1998, have been retroactively adjusted for this split as if
it occurred on April 1, 1997. In addition, the statement of changes in
stockholders' equity has been retroactively adjusted as if the split occurred on
March 31, 1997.
SUBSEQUENT EVENTS: In June 1999, the Company completed additional private
offerings of common stock at prices ranging from $0.25 to $1.50 per share. The
total number of shares issued in conjunction with the offerings was 1,532,929,
with gross proceeds of approximately $1,030,000 before offering costs and
commissions. $564,514 was received prior to March 31, 1999, net of commissions
of $60,986.
In addition, the Company issued 674,500 of additional common shares in lieu of
cash for various expenses. The expense recorded was based upon quoted market
price of the stock issued.
NOTE 6. INCOME TAXES
At March 31, 1999, the Company has accumulated a net operating loss of
approximately $12,200,000, which may be used to reduce future taxable income
through 2014. A valuation allowance has been recognized to completely reserve
for the deferred tax assets related to the loss carryforwards. The reserve has
been established because of the uncertainty of future taxable income, which is
necessary in order to realize the benefits of the net operating loss
carryforwards. Any tax benefits realized in the future from preconfirmation
operating loss carryforwards will be reported as a direct addition to additional
paid-in capital.
10
<PAGE> 40
XDOGS.COM
(FORMERLY THE SLED DOGS COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6. INCOME TAXES (CONTINUED)
The Company's ability to utilize these carryforwards to offset future taxable
income is subject to certain restrictions under Section 382 of the Internal
Revenue Code due to certain changes in the equity ownership of the Company.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes. Components of the Company's
deferred tax assets are:
<TABLE>
<CAPTION>
March 31
------------------------------
1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 4,880,000 $ 5,480,000
------------ ------------
Total deferred tax assets 4,880,000 5,480,000
Less valuation allowance (4,880,000) (5,480,000)
------------ ------------
Net deferred tax assets $ -- $ --
============ ============
</TABLE>
Loss carryforwards for tax purposes as of March 31, 1999, have the following
expiration dates:
<TABLE>
<CAPTION>
Expiration Date Amount
- --------------------------------------------------------------------------------
<S> <C>
2009 $ 530,000
2010 2,970,000
2011 3,210,000
2012 2,990,000
2013 2,500,000
------------
$ 12,200,000
============
</TABLE>
NOTE 7. TRANSACTIONS WITH OFFICER/STOCKHOLDER
During the year ended March 31, 1999, the Company issued a total of 3,374,102
shares to an officer of the Company in exchange for compensation of $105,000 and
$843,500 for a personal guaranty provided on certain company debt. The value of
the stock issued was recorded at quoted market price on the date of issuance.
NOTE 8. EXTRAORDINARY ITEM ON DEBT EXTINGUISHMENT
On February 3, 1999, the Company reached an agreement with the bank on certain
indebtedness owing to the bank in the amount of $780,181. The Company exchanged
50,000 shares of common stock and $293,206 in exchange for release of the
amounts owed. The market value of the stock issued as of February 3, 1999, was
$84,350 based on quoted market price. The resulting gain of $402,625 is shown as
an extraordinary item in the accompanying consolidated statement of operations.
There is no tax effect on the gain due to operating loss carryforwards and a
loss for the nine-month period ended March 31, 1999.
11
<PAGE> 41
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
Our Directors and Executive Officers as of March 31, 1998 are shown
below:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
KENT RODRIGUEZ 42 CHAIRMAN, PRESIDENT, DIRECTOR
BRYANT LOVING 46 DIRECTOR
ROBERT CORLISS 45 DIRECTOR
CRAIG AVERY 50 SECRETARY
</TABLE>
Each Director is serving a term of office which will continue until the next
annual meeting of shareholders and until the election and qualification of his
respective successor.
KENT RODRIGUEZ.
Mr. Rodriguez joined us as Chairman, President, and Chief Executive Officer in
January, 1997. Since 1995, he has been the Managing Partner of Weyer Capital
Partners, a Minneapolis-based venture capital corporation. From 1985 to 1995, he
was employed by the First National Bank of Elmore, Minnesota in various
capacities. He has a B.A. degree from Carleton College.
BRYANT LOVING
Mr. Loving has served as one of our Directors since November, 1997. Since 1991,
he has been the Chief Executive Officer of LA Loving, a wholesale distributor of
sportswear apparel and distributor of active wear for several major U.S.
manufacturers, including Fruit of the Loom, Hanes, Lee, and Jerzees. He has a
B.A. degree from the University of Minnesota. Mr. Loving shall devote such time
as is necessary to carry out his responsibilities as an Officer and Director of
our Company.
ROBERT CORLISS
<PAGE> 42
Mr. Corliss has served as one of our Directors since July, 1997. Since 1993
until September, 1998, he has been the President of Infinity Sports and Leisure
Group of Lebanon, New Jersey, a designer, manufacturer and distributor of
athletic products under the Bike Athletic and Marksman brand names. He was also
President and Chief Executive Officer of Herman's Sporting Goods, Inc. which he
sold in 1993. In September, 1998, he was named Chief Executive officer of The
Athlete's Foot, a chain of retail athletic footwear stores. He has an MBA degree
from the University of Maryland. Mr. Corliss shall devote such time as is
necessary to carry out his responsibilities as an Officer and Director of our
Company.
CRAIG AVERY
Mr. Avery has served as our Secretary since August, 1997. For the past several
years, he has been the owner of Craig C. Avery Company, a Minneapolis-based real
estate development and investment company, which has developed apartments,
senior housing, office buildings, and industrial and residential land
subdivisions. Mr. Avery currently serves on the Boards of Call 4 Wireless, Rock
Cliff Development, Cash-N-Pawn, and Host Partners. He has a B.A. and MBA degree
in Finance from the University of Minnesota. Mr. Avery shall devote such time as
is necessary to carry out his responsibilities as an Officer of our Company.
The Board of Directors has established no committees. Members of the
Board of Directors receive no additional compensation for their service on the
Board of Directors.
Our Directors will serve in such capacity until our next annual meeting
of shareholders and until their successors have been elected and qualified.
There are no family relationships among our officers and directors, nor are
there any arrangements or understanding between any of our directors or officers
or any other person pursuant to which any officer or director was or is to be
selected as an officer or director.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 (the "34 Act")
requires our officers and directors and persons owning more than ten percent of
our Common Stock to file initial reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). Additionally, Item 405 of
Regulation S-B under the 34 Act requires us to identify in its Form 10-KSB and
proxy statement those individuals for whom one of the above referenced reports
was not filed on a timely basis during the most recent fiscal year or prior
fiscal years. Given these requirements, we have the following report to make
under this section. All of our officers or directors, and all persons owning
more than ten percent of its shares have filed the subject reports, if required,
on a timely basis during the past fiscal year.
<PAGE> 43
ITEM 10. EXECUTIVE COMPENSATION
Only one executive officer accrued compensation and no executive officer
accrued or received compensation in excess of $100,000 during the fiscal year
ended March 31, 1998. Compensation does not include minor business-related and
other expenses paid by us for our officers during fiscal year 1998. Such amounts
in the aggregate do not exceed $10,000. Our Chief Executive Officer, Mr. Kent
Rodriguez accrued compensation of $15,000 for 1998, which included a salary of
$7,000 per month and a $500 per month car allowance. No executive officer
accrued or received compensation for the previous fiscal year.
From time to time, we have granted shares of our common stock as
additional compensation to its officers and key employees for their services, as
determined by our Board of Directors. During fiscal years 1998 and 1997, no
shares were granted to officers or key employees.
As of March 31, 1998, we had no group life, health, hospitalization,
medical reimbursement or relocation plans in effect. Further, we have no pension
plans or plans or agreements which provide compensation on the event of
termination of employment or change in control of our Company.
We do not pay members of our Board of Directors any fees for attendance
or similar remuneration, but reimburses them for any out-of-pocket expenses
incurred by them in connection with our business.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of our
Common Stock as of March 31, 1998 by (i) each person known by us to be the
beneficial owner of more than five percent of our outstanding common stock; (ii)
each director of our Company; and (iii) all executive officers and directors of
our Company as a group.
<TABLE>
<CAPTION>
Names and Addresses Beneficial Percent
of Beneficial Owner Ownership of Class
<S> <C> <C>
Kent Rodriguez -0- -0-
80 South Eight Street
Suite 3660
Minneapolis, Minnesota 55402.
Bryant Loving -0- -0-
80 South Eight Street
Suite 3660
Minneapolis, Minnesota 55402.
</TABLE>
<PAGE> 44
<TABLE>
<S> <C> <C>
Robert Corliss -0- -0-
80 South Eight Street
Suite 3660
Minneapolis, Minnesota 55402.
Craig Avery -0- -0-
80 South Eight Street
Suite 3660
Minneapolis, Minnesota 55402.
Officers and Directors -0- -0-
as a Group (4 persons)
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have no reportable transactions.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. See "Exhibit Index" immediately following the signatures
on this report on Form 10-KSB.
(b) Reports on Form 8-K. No report on Form 8-K was filed during the last
quarter of fiscal year 1998.
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Company has caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: February 18, 2000 XDOGS.COM, INC.
/s/ Kent Rodriguez
------------------------------------
Kent Rodriguez, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Company in the
capacities and on the dates indicated.
Signature and Title Date
- --------------------- ----
/s/ Kent Rodriguez February 18, 2000
- --------------------------------------------
Kent Rodriguez, President,
Chief Executive Officer and
Director (Principal Executive Officer)
/s/ Craig Avery February 18, 2000
- --------------------------------------------
Craig Avery, Chief Financial Officer, Treasurer and
Secretary (Principal Financial and Accounting Officer)
<PAGE> 46
/s/ Bryant Loving February 18, 2000
- -------------------------------------------
Bryant Loving, Director
/s/Robert Corliss February 18, 2000
- -------------------------------------------
Robert Corliss, Director
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
THE SLED DOGS COMPANY
EXHIBIT INDEX TO FORM 10-KSB
For the fiscal year Commission File Number 1-12850
ended March 31, 1998
<TABLE>
<CAPTION>
Exhibit Description Page Number
- ------- ----------- -----------
<S> <C> <C>
3.1 Restated Articles of Incorporation (Incorporated by reference to *
Exhibit 3.1 to Registration Statement on Form SB-2, Registration
No. 33-74240C).
3.2 Restated Bylaws (Incorporated by reference to Exhibit 3.2 to *
Registration Statement on Form SB-2, Registration No.
33-74240C).
4.1 Specimen of Common Stock (Incorporated by reference to Exhibit *
4.1 to Registration Statement on Form SB-2, Registration No.
33-74240C).
10.1 Contract of Sale between Hannes Jacob and Allrounder Idea *
Realization, S.A. and Snow Runner (Properties) Inc. dated
September 3, 1993 (Incorporated by reference to Exhibit 10.1 to
Registration Statement on Form SB-2, Registration No.
</TABLE>
<PAGE> 47
<TABLE>
<S> <C> <C>
33-74240C).
10.2 Payment Agreement between Hannes Jacob and Allrounder Idea *
Realization, S.A. and Snow Runner (Properties) Inc. dated
September 3, 1993 (Incorporated by reference to Exhibit 10.2 to
Registration Statement on Form SB-2, Registration No.
33-74240C).
10.3 Termination and Release Agreement between Hannes Jacob and *
Allrounder Idea Realization, S.A. and Snow Runner (Properties)
Inc. dated September 3, 1993 (Incorporated by reference to
Exhibit 10.3 to Registration Statement on Form SB-2,
Registration No. 33-74240C).
10.4 Assignment, Bill of Sale and Agreement between DalBello Sport *
S.R.L. and Snow Runner (USA), Inc. effective September 3, 1993
(Incorporated by reference to Exhibit 10.4 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.5 Product Manufacturing Agreement between Snow Runner (USA) Inc. *
and DalBello Sport S.R.L. effective September 3, 1993
(Incorporated by reference to Exhibit 10.5 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.6 Product Development Agreement between Snow Runner (USA) Inc. and *
DalBello Sport S.R.L. effective September 3, 1993 (Incorporated
by reference to Exhibit 10.6 to Registration Statement on Form
SB-2, Registration No. 33-74240C).
10.7 Termination and Release Agreement between DalBello Sport S.R.L. *
and Snow Runner (USA) Inc. effective September 3, 1993
(Incorporated by reference to Exhibit 10.7 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.8 Termination and Release Agreement between DalBello Sport S.R.L. *
and Snow Runner (Properties) Inc. effective September 3, 1993
(Incorporated by reference to Exhibit 10.8 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.9 Inter-company Assignment and Bill of Sale between Snow Runner *
(USA) Inc. and Snow Runner (Properties) Inc. effective September
3, 1993 (Incorporated by reference to Exhibit 10.9 to
Registration Statement on Form SB-2, Registration No.
33-74240C).
10.10 License Agreement between Snow Runner (Properties) Inc. and Snow *
Runner (USA) Inc. effective September 3, 1993 (Incorporated by
reference to Exhibit 10.10 to Registration Statement on Form
SB-2, Registration No. 33-74240C).
10.11 License Agreement between Hannes Jacob and Allrounder *
Realization SA and Snow Runner (USA) Inc. dated June 26, 1992
</TABLE>
<PAGE> 48
<TABLE>
<S> <C> <C>
(Incorporated by reference to Exhibit 10.11 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.12 Amended and Restated Distribution Agreement between Snow Runner *
(USA) Inc. and DalBello Sport S.R.L. dated June 26, 1992
(Incorporated by reference to Exhibit 10.12 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.13 Stock Purchase Agreement between Snow Runner (USA) Inc. and *
HAIFinance Corp. dated July 25, 1992 (Incorporated by reference
to Exhibit 10.13 to Registration Statement on Form SB-2,
Registration No. 33-74240C).
10.14 Assignment and Assumption Agreement between Snow Runner (USA) *
Ltd. and Snow Runner Holdings, Inc. dated July 23, 1992
(Incorporated by reference to Exhibit 10.14 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.15 SnowRunner, Inc. Stock Option Plan effective January 1994 *
(Incorporated by reference to Exhibit 10.15 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.16 Lease between the Company and Midtown Commons dated September *
29, 1993 (Incorporated by reference to Exhibit 10.16 to
Registration Statement on Form SB-2, Registration No.
33-74240C).
10.17 Lease between the Company and McCann Developments dated *
September 29, 1993 (Incorporated by reference to Exhibit 10.17
to Registration Statement on Form SB-2, Registration No.
33-74240C).
10.18 Shareholder Agreement by and among Snow Runner (USA) Inc., Nigel *
Alexander, Steven Clarke, Harbour Settlement, HAIFinance Corp.
dated July 28, 1992 (Incorporated by reference to Exhibit 10.18
to Registration Statement on Form SB-2, Registration No.
33-74240C).
10.19 Reorganization Agreement by and among Snow Runner (USA) Ltd., *
Snow Runner Holdings, Inc., Nigel Alexander, Steven Clarke and
Harbour Settlement dated July 23, 1992 (Incorporated by
reference to Exhibit 10.19 to Registration Statement on Form
SB-2, Registration No. 33-74240C).
10.20 Amendment to Limited Partnership Agreement by and among Snow *
Runner Holdings, Inc., Nigel Alexander, Steven Clarke and
Harbour Settlement dated July 23, 1992 (Incorporated by
reference to Exhibit 10.20 to Registration Statement on Form
SB-2, Registration No. 33-74240C).
10.21 Option Agreement by and between Nigel Alexander and Steven *
Clarke dated July 28, 1992 (Incorporated by reference to Exhibit
</TABLE>
<PAGE> 49
<TABLE>
<S> <C> <C>
10.21 to Registration Statement on Form SB-2, Registration No.
33-74240C).
10.22 Employment Agreement dated January 1, 1994 for John Sundet *
(Incorporated by reference to Exhibit 10.22 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.23 Employment Agreement dated January 1, 1994 for Nigel Alexander *
(Incorporated by reference to Exhibit 10.23 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.24 Employment Agreement dated January 1, 1994 for Mary Horwath *
(Incorporated by reference to Exhibit 10.24 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.25 Employment Agreement dated January 1, 1994 for Steven Clarke *
(Incorporated by reference to Exhibit 10.25 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.26 Loan Agreement by and between Snow Runner (USA), Inc. and *
HAIFinance Corp. dated January 7, 1994 (Incorporated by
reference to Exhibit 10.26 to Registration Statement on Form
SB-2, Registration No. 33-74240C).
10.27 Term Note to HAIFinance Corp. dated January 7, 1994 *
(Incorporated by reference to Exhibit 10.27 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.28 Existing Loans Note to HAIFinance Corp. dated January 7, 1994 *
(Incorporated by reference to Exhibit 10.28 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
10.29 Bridge Financing Agreement by and between Snow Runner (USA), *
Inc. and HAIFinance Corp. dated January 7, 1994, with
Registration Rights Agreement (Incorporated by reference to
Exhibit 10.29 to Registration Statement on Form SB-2,
Registration No. 33-74240C).
10.30 Security Agreement dated January 7, 1994 made by Snow Runner *
(USA), Inc. to HAIFinance Corp. (Incorporated by reference to
Exhibit 10.30 to Registration Statement on Form SB-2,
Registration No. 33-74240C).
10.31 Subordinated Promissory Note dated September 16, 1993 to Seaton *
Place Nominees, Ltd. (Incorporated by reference to Exhibit 10.31
to Registration Statement on Form SB-2, Registration No.
33-74240C).
10.32 Amended and Restated Shareholders Agreement dated January 7, *
1994 by and among Snow Runner (USA) Inc., Nigel Alexander,
Steven Clarke, Harbour Settlement, HAIFinance Corp.
(Incorporated by reference to Exhibit 10.32 to Registration
Statement on Form SB-2, Registration No. 33-74240C).
</TABLE>
<PAGE> 50
<TABLE>
<S> <C> <C>
10.33 Credit and Security Agreement dated June 30,1995 between the *
Company and Norwest Credit, Inc.
10.34 Revolving Note for $2,000,000 dated June 30, 1995 between the *
Company and Norwest Credit, Inc.
10.35 Patent and Trademark Security Agreement dated June 30, 1995 *
between the Company and Norwest Credit, Inc.
10.36 Consulting Agreement with Douglas Ellenoff dated January 1, 1995. *
10.37 Consulting Agreement with Stephen C. Martin dated January 1, *
1995.
10.38 Market Representative Agreement, dated July 24, 1996, between *
the Company and Japan Business Link, Inc.
10.39 Agency Services Agreement, dated July 26, 1996, between the *
Company and Williams Television Time, Inc.
10.40 Telesales Service Agreement, dated August 12, 1996, between the *
Company and Icon Health & Fitness, Inc.
10.41 Agreement, dated September 18, 1996, between the Company and *
Distribution Systems and Services Corporation
13 Portions of 1996 Annual Report to Shareholders *
21 List of Subsidiaries (Incorporated by reference to Exhibit 21 to Registration *
Statement on Form SB-2, Registration No. 33-74240C).
</TABLE>
--------------------
* Incorporated by reference to a previously filed exhibit or report.
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